Final Results

RNS Number : 8270P

VietNam Holding Limited

22 August 2014

 



VietNam Holding Limited ("VNH" or the "Company")

Final Results for the Year ended 30 June 2014

VietNam Holding Limited (AIM : VNH), an investment company with a diversified portfolio invested in Vietnamese equities, is pleased to announce its results for the year ended 30 June 2014.

Highlights:

- Total NAV up 36.6% from USD 88.2 million to USD 120.5 million
- NAV per share up 24.7% from USD 1.54* to USD 1.92
- Share price up 17.9% from USD 1.24 to USD 1.46

*Adjusted to reflect dilution from past warrants exercises.

Min-Hwa Hu Kupfer, Chairperson of VNH, commented:

"As part of its efforts to reduce the share price discount to NAV, VNH has stepped up its share buy-back program.  The buy-back mandate from shareholders was renewed at the 2013 AGM and by 30 June 2014 a further 1.7 million shares had been repurchased from the secondary market. By the end of the Year there were clear signs that the discount had begun to narrow."

Jean-Christophe Ganz, Chairman, VietNam Holding Asset Management, added:

"As a value investor, we can best test the valuation of the VNH portfolio by comparing its company holdings to the appropriate total market segment. This also provides an important and fitting validation of VNH's value investment strategy. Comparing the P/E ratios of the three Vietnam All Share Index market segments to those of the corresponding elements in the VNH portfolio illustrates the successful implementation of that strategy."

For more information please contact:

VietNam Holding Asset Management Limited
Gyentsen Zatul - Investor Relations
Tel: [phone]

Altium Capital Limited (Nominated Adviser)
Ben Thorne / Tim Richardson
Tel: [phone]
Winterflood Investment Trusts (Broker)
Joe Winkley / Neil Langford
Tel: [phone]

Buchanan Communications
Charles Ryland / Sophie McNulty
Tel: [phone]

Chairperson's statement

Supported by Vietnam's steadily improving macro-economic stability, over the financial year ended 30 June 2014 (the "Year") the companies in VNH's portfolio benefited from an ascending equities market.  This resulted in a 24.7% increase in its Net Asset Value (NAV) per share over the Year, outpacing by a comfortable margin the 16.3% increase of the Vietnam All Share Index (VNAS) during the same period.  Once adjusted for the accretion impact generated by the Company's share buy-back efforts, its NAV per share  rose 22.6% during the Year.  For the first six months of the Year, the NAV per share increased by 10.2%, also ahead of the 9.0% increase in the VNAS.  The Investment Manager's Report that follows explains why we believe that the VNAS - which was launched in January 2014 - rather than the Vietnam Index (VNI) serves as a more relevant and meaningful basis of comparison when benchmarking the performance of VNH's portfolio.

Accompanying the healthy growth in NAV per share, VNH's share price rose by 17.9% in the Year.  Although this advance compares favorably with the VNAS over the same period, VNH's share price only began to out-perform the upward trending NAV in  the last six months of the Year, when it rose by 14.0%.  For the Year as a whole, however, after taking into account the cash infusion from the recent warrants exercise (see details below), the Company's share price lagged VNH's particularly strong NAV performance, trading at a marked discount to NAV per share.

Discount control has been a top priority for the Company, especially since the AGM in September 2013. At that meeting, the Company targeted a share price discount to NAV per share by the 2014 AGM of no greater than 95% of the 52-week weighted average discount of its peers.* We are disappointed that for the Year, the 52-week average discount achieved by VNH was 4.3% higher than the 20.4% target for that period. 

As part of its efforts to reduce this unwelcome share price discount, VNH has stepped up its share buy-back program.  The buy-back mandate from shareholders was renewed at the 2013 AGM and by 30 June 2014 a further 1.7 million shares had been repurchased from the secondary market. By the end of the Year there were clear signs that the discount had begun to narrow.

The Company believes that its share price discount will continue to lessen if more resources are allocated to a better executed share repurchase program.  To that end, VNH put in place a plan that permits the Company to fully utilize the remaining amount under its annual buy-back limit leading up to the 2014 AGM. This includes authorizing the Company's newly-appointed broker, Winterflood Investment Trusts, to pro-actively buy back shares on its behalf during the close period prior to the announcement of these financial results. 

The relatively high 52-week average share price discounts to NAV experienced  by VNH and its peers suggest that the liquidity in most, if not all, closed-end Vietnam equity funds has yet to fully recover from the Vietnam Index's last low (at 235) in early 2009.  Over the past five years, the lack of appetite shown by foreign investors for these Vietnam-related funds has been further evidenced by the complete absence of new capital inflows. An exception to this was the USD 15.5 million that VNH raised through the warrants exercise that was finalized in October 2013.  This additional capital has since been swiftly put to work, assisting the growth in NAV per share for the Year and providing an equally rewarding 22.3% return on the money deployed by VNH's investors in exercising the warrants.  

The placement of a Chinese offshore oil rig near the Paracel Islands in the South China Sea in early May 2014 increased tensions with Beijing and tempered the relatively strong performance of Vietnam's stock market in the first four months of 2014. Despite this, the VNAS recouped most of its losses by the end of June and an initial reading of Vietnam's macro-economic data for 2Q2014 also suggests that the adverse impact of the South China Sea incident - and the riots that followed - has been manageable.  While it is too early to predict accurately how the offshore territorial dispute between China and Vietnam will unfold, we believe that the potential for any additional risks are remote, as China has subsequently withdrawn the offending oil rig.  This view appears to be supported by other foreign investors, as mentioned in the following Investment Manager's Report.

On behalf of  the entire VNH family, I wish to thank all of our shareholders for their continuing interest in our Company.  Encouraged by the positive impacts of the  last warrant issuance, Vietnam's improving macro-economic environment, the relatively low equity market valuations, and the more positive sentiment being conveyed by the resilient corporate sector, we remain convinced that VNH is the investment vehicle of choice for all long term investors in Vietnam.

Min-Hwa Hu Kupfer
Chairperson

*The peer group comprises: Vietnam Enterprise Investments Ltd., PXP Vietnam Fund Limited and Vietnam Equity Holding Limited.

Investment Manager's Report

In the preceding Chairperson's Statement, Mrs. Min-Hwa Kupfer points to VNH's impressive NAV outperformance of its new (VNAS) benchmark.  Before providing explanations for this pleasing result, we would like to review the reasons for changing the benchmark.

The VNAS was launched on 27 January 2014. The VNAS covers the Ho Chi Minh City Stock Exchange (HOSE) free float universe. It has three sub-indices which cover, respectively, the 30 largest capitalized firms, the mid-cap, and the small-cap segments.

We strongly believe that the VNAS is a much more compatible benchmark for VNH than the VNI for the following reasons:

•      The VNI includes all 298 companies listed on the HOSE at their full market capitalizations (a total of USD 47.8 billion as at 30 June 2014) without any adjustments for free float. The VNAS, a market-cap weighted index of all HOSE listed stocks, is adjusted for free float, with a total market capitalization of USD 12.4 billion on the same date;

•      As of 30 June 2014, the VNAS also excluded some 53 companies that have been suspended for trading or have received regulatory warnings by the HOSE or have insufficient free float;

•      The VNAS excludes companies with less than a 5% free float. The most significant of those excluded is PetroVietnam Gas, which, despite a free float of only 3.3% and high volatility, makes up 21.7% of the VNI;

•      The VNAS excludes shares which do not meet specific trading liquidity standards;

•      The VNAS caps any one company at 10% of the total index in order to provide a more balanced weighting of the market components; Vinamilk, for example, would otherwise have accounted for 26.8% of the VNAS;

•      The VNAS' three sub-indices allow us to provide a finer segmentation of the VNH portfolio and to compare its performance and valuations to the comparable segments of the overall market.

As a value investor, we can best test the valuation of the VNH portfolio by comparing its company holdings to the appropriate total market segment. This also provides an important and fitting validation  of VNH's value investment strategy. Comparing the P/E ratios of the three VNAS market segments to those of the corresponding elements in the VNH portfolio illustrates the successful implementation of that strategy:

VNAS P/E ratios				VNH Portfolio P/E ratios
Large Cap	Mid Cap	Small Cap	Total	Large Cap	Mid Cap	Small Cap	Total
12.0	12.06	10.86	12.04	11.8	10.2	8.5	10.7

Over the last few years, we have developed VNH's main portfolio themes of Agriculture and Domestic Consumption and have tracked their respective performances against the VNI benchmark.  These comparisons have been VNH's main performance drivers. Over the past financial year, we have accumulated shares in companies that represent a third mega trend in Vietnam: Urbanization.  We provided an in-depth review of this theme in the Company's Interim Report for the period ended 31 December 2013.

As of the 2014 financial year-end, the three themes produced the following percentage contributions to VNH's overall performance, reflected as the annual increase in segment value in the local currency (VND):

	Theme Portfolio Allocation		Valuations - P/E		Performance
	30 June 13	30 June 14	30 June 13	30 June 14	June 13 - June 14
Agriculture	30%	14%	8.3	13.8	9.7%
Consumption	42%	38%	10.2	12.9	16.5%
Urbanization	14%	26%	6.8	10.9	49.6%
Total Portfolio	100%	100%	8.3	10.7	26.6%

The table above shows that the most recent of these investment themes - Urbanization - was a key contributor to VNH's out-performance of the benchmark VNAS. 

The declining size of the allocation to Agriculture in the VNH portfolio shown in the above table has two main causes: first, we started to rebalance our Agriculture exposure prior to 30 June 2013 in anticipation of a global decline in agricultural commodity prices; secondly, following the Rubber Barons report by Global Witness which described the apparently wide-spread and systematic ESG violations of Vietnamese rubber groups in Cambodia, we exited VNH's two rubber investments. Declining rubber price projections soon validated this decision.

Having written extensively about the old and new benchmark, it is important for us to point out that as a sustainable value investor, VNH's main investment management objectives are not linked to the portfolio's relative performance compared to any index, but to the absolute, long term return that is generated for its investors. At the same time, we are fully aware that investors will always put VNH's investment performance within the context of the performance achieved by both its peers and the corresponding market overall.

The Market and Economic Overview presented in the following section takes a closer look at Vietnam's much improved macro-economic environment as well as at the stock market and its outlook.  Unlike many other Asian stock markets, the role of foreign investors in Vietnam has been marginal over the past five years. During the period between 2009 and 2013, the average market share of foreign investors ranged between 8.6% and 10.7%. Hence, the rather disappointing local stock market performance over this period reflected the relatively modest risk appetite of the domestic Vietnamese investors.

During the first six months of this year, the picture started to change as foreign investors became increasingly interested in Vietnam's modestly-sized stock market. This is shown by comparing the absolute and relative amounts of foreign investment into the Vietnamese equity markets.  During the first half of 2014, foreign investors added USD 284 million in incremental investments in Vietnam. That is an equivalent of 2.2% of the total free float as defined by the VNAS.  The net investment flows of the peer countries India, Indonesia, Philippines and Thailand ranged from -0.3% for Thailand to +1.0% for Indonesia.

Min-Hwa Kupfer wrote in her Statement about the Vietnamese equity markets' reactions to the China oil rig incident. Yet, between 1 May 2014 and 30 June 2014, foreign investors were net buyers on almost every business day and cumulatively invested USD 168 million.  By mid-year, the market had recovered 10% of the total 12% decline recorded by the VNAS at the beginning of that period. The market subsequently recovered the remaining losses, and indices later reached levels not seen since the fall of 2009.  However, while the total market valuations as expressed by the VNAS had reached a P/E of 21.9x in September 2009, the VNAS P/E in early August 2014 was reported at just 13.1x. We explain the much lower valuations of today by a) the listed companies' collective lower earnings growth and b) the more reasonable valuation levels of new listings. It is no wonder that foreign investors continue to allocate funds to the Vietnamese equity market.

Jean-Christophe Ganz
Chairman

Market and Economic Overview

The last twelve months have witnessed a sustained and welcomed improvement in Vietnam's macro-economic profile and corporate sector performance, some of which has been reflected in the gains displayed by the equity markets.  In 1H2014, the VNAS rose by 9.0%, as noted in the Chairperson's Statement, and by 16.3% during the Year. In terms of the overall economic picture, GDP growth in 1H2014 was 5.2%, and with economic growth momentum providing a helping tailwind, the World Bank currently forecasts that GDP growth for calendar year 2014 should come in at around 5.6%.  Echoing this, the IMF's most recent 'Article IV' assessment of Vietnam's economy, issued in June, noted that "recent achievements in macro-economic stabilization are commendable".

As the global economy slowly recovers from the sub-prime financial crisis, Vietnam has seen inflows of foreign direct investment remaining robust, with substantial projects being enacted in higher value-added fields of manufacturing.  Earlier in 2014, mobile telephones took over as the single largest export earner for Vietnam, exceeding garments, footwear, seafood, coffee, oil and a host of other commodities with which the country's trade is most often associated.  Further, the foreign-invested sector has become a major component of the overall economy, helping Vietnam to record some of its first monthly trade surpluses.  With Intel recently announcing that it plans to produce 80% of all its fourth generation CPUs (central processing units) in Vietnam by the end of 2014, and Microsoft indicating that a large portion of its Nokia manufacturing in China will relocate to Vietnam, this dynamic seems destined to continue for quite some time.  For 1H2014, initial estimates suggest that Vietnam's registered export earnings will reach USD 70.9 billion; an increase of 15% YoY, with 60% of it emanating from the foreign-invested sector.

China's controversial decision in May 2014 to position an exploratory oil rig in territorial waters contested by both Hanoi and Beijing, and just 120 miles off Vietnam's central coast, ignited a spate of rioting and looting in some industrial areas.  This  prompted a sell-off by domestic retail investors, presumably fearing that such events could undermine Vietnam's economic growth, and the stock market indices corrected accordingly.  However, numerous foreign institutions saw this as a buying opportunity, and used this window of opportunity to increase their positions in various Vietnamese stocks,  particularly those previously at the foreign equity cap.  As a consequence, the 1H2014 saw a market rally from January to late March, punctuated by a pronounced dip in April and early May. This was followed by a second rally, commencing in mid-May, that allowed the equity indices to recoup most of the losses incurred during the earlier correction.  China subsequently withdrew its rig in mid-July.

Thanks in part to some relatively large IPOs and listings over the last twelve months, such as Mobile World and PetroVietnam Gas, the total market capitalization of the Ho Chi Minh City Stock Exchange is now at roughly USD 48 billion, substantially higher than last year's USD 38 billion (at 30 June 2013).  Even so, using the P/E ratio as an indicative measure of value, Vietnamese stocks remain relatively cheap compared to those of their regional peers, with the VNAS' P/E at 12.0 as of the end of June 2014.  The fundamentals of corporate earnings are also of a higher quality than has often been the case in the past, as bank credit and other forms of liquidity have been brought under tighter control. This has resulted in improved financial discipline in the corporate sector.  Indeed, credit growth has been muted for much of the last twelve months.

Vietnam's improved macro-economic performance is due in large part to a more sensitive approach by the government towards economic governance, the latter having learned from the somewhat erratic economic gyrations of recent years.  By adopting a more subtle manipulation of various policy levers, Hanoi has been able to catalyze a gradually improving GDP growth trajectory, while simultaneously containing inflationary forces.  This is not to suggest that the economy is yet performing at its optimal rate, but its profile is more balanced and the outlook is more positive.  Importantly, in late July 2014, Moody's raised Vietnam's overall credit rating from B2 to B1, with a stable outlook, citing improved macro-economic stability, a strengthened balance of payments position, and a perceived reduction in banking sector risks.  Inflation seems to have been tamed also, with the CPI at just 1.38% YTD and 4.98% YoY, as of June 2014, the lowest level of inflation in over a decade- despite the recent increases in petroleum prices.

Some of Vietnam's economic growth is due to various stimulation measures by the government, which entail an increase in budgetary expenditures.  In 1H2014, the Ministry of Finance raised just over USD 44 billion in a bond issuance to help underwrite some of these costs. The VND currency held relatively steady for much of 1H2014, although in mid-June the State Bank of Vietnam enacted a 1% devaluation in the reference rate; the first such move in a year.  As a result, the VND was at 21,330 against the US dollar by end-June.  By comparison, most other Southeast Asian currencies have devalued much more against the greenback over the last year.  And with the opening of McDonald's in Vietnam earlier in 2014, The Economist's 'Big Mac Index' would suggest that the VND remains about  40% under-valued.  The country's foreign exchange reserves are now reported to be near USD 35 billion; the highest level for a long time.

In addition, some of the economic growth has come from incremental moves toward a much less bloated and self-indulgent corporate sector.  In particular, we have seen the larger SOEs given clear instructions from their government masters to reform, notably in terms of divesting themselves of non-core assets, moving ahead with plans to become more profit-oriented, and in some cases to sell a portion of their shares to outside investors.  In the private sector, we have seen a thinning out of numerous unprofitable companies that had previously been able to avoid bankruptcy through access to easy credit.  Nevertheless, corporate sector reform in Vietnam remains very much a work in progress. but with some tangible advances over the last twelve months.  For example, the HSBC Purchasing Managers' Index (PMI) was above the 50-point level (indicating an increasing rate of growth) for ten consecutive months to June 2014, having been mostly below the 50 point level (indicating an increasing rate of contraction) for 19 of the previous 26 months.

The banking sector is also going through some positive changes.  A number of smaller banks have opted to merge, largely in a bid to comply with the government's tighter regulations on the classification of non-performing loans and provisioning, as well as the size of their capital base.  There have also been moves to reduce cross-holdings in banks, as well as ceilings on how much equity a single person, family or organization may own in a bank.  Nonetheless, a number of banking scandals over the last year - such as those at Vietnam Construction Bank, Vietnam Bank for Agriculture and Development and VietinBank - have cumulatively served to prove that governance structures and practices in the financial sector remain in need of improvement.  Meanwhile, the State-owned Vietnam Asset Management Company has been quite active over the last year in buying bad debt from banks, and thereby reducing the scale of NPLs in some banks' loan portfolios.  A more fundamental improvement in the banking sector will necessitate an improvement in the property sector, which remains sickly. This will require the larger SOEs to repay some of the loans they took out to finance their earlier, fairly indiscriminate bid to diversify into a range of businesses of which they had little knowledge, and must now spin off.

Looking to the year ahead, we remain generally optimistic about Vietnam's economic and corporate sector prospects, and anticipate that this will be reflected in the performance of Vietnam's equity markets.  A number of high profile equalizations are widely expected, including those of Vinatex and Vietnam Airlines, among others.  But behind the headline-grabbing news, we see policy-makers and corporate leaders alike 'getting real' about a number of fundamental economic issues - including SOE reform. This bodes well for the next chapter in Vietnam's development story.  While there has been some talk of creating a 'super ministry' to oversee the entire SOE sector and its reform, many think that the existing State Capital Investment Corporation (SCIC) should be given this mandate, and the resources to carry it out.  A revised Enterprise Law is being drafted, providing an opportunity to enact further reforms in areas such as corporate governance practices.  There is also wide anticipation that the 49% cap on foreign holdings in listed companies will be raised, possibly up to 60%.

Our primary aim remains for VNH to provide a means by which shareholders can get the best exposure to Vietnam's long-term growth potential. We will do so with continued emphasis on both capturing hidden value and promoting a sustainable approach to corporate sector expansion and macro-economic growth.

Directors' report

The Board of Directors makes all policy decisions on investment strategies, portfolio allocations, investment risk profiles, capital increases and profit distributions to Shareholders. It also appoints the Investment Manager, to whom it provides such instructions as may be appropriate.

The Board is responsible for reviewing the Company's Investment Policy and the performance of its investment portfolio. In particular, the Board is required to approve all investments that are in excess of 4% of the Net Asset Value at the time that the investment is made. Disposals of investments where the Company holds 4% or more of the total share capital of the respective portfolio company are also subject to the approval of the Board.

As a Cayman Islands incorporated company that is admitted to trading on the London Stock Exchange's AIM division and with a secondary listing on the Frankfurt Stock Exchange's Entry Standard Market, the Company is not required to, and does not comply with any particular code of corporate governance.  However, the Directors recognise the importance of sound corporate governance commensurate with the size of the Company and the interests of Shareholders. The Company has therefor adopted a code of ethics, which applies to all directors and advisors as well as to all VNHAM employees. The Directors also comply with the AIM Rules, including Rule 21 relating to directors' dealings. The Company has also adopted a code for directors' dealings in securities of the Company based on the model code annexed to chapter 9 of the Listing Rules of the Financial Conduct Authority in the UK.

Presently the Board consists of three non-executive Directors, all of whom are regarded by the Board as independent, including the Chairperson, and are subject to re-election annually.  The Board takes careful consideration when recommending Directors for re-election and views that length of service alone does not necessarily restrict Directors from seeking re-election.  Current Directors include:

Mrs. Min-Hwa Hu Kupfer, Chairperson
Professor Rolf Dubs
Mr. Nguyen Quoc Khanh

The Board has also established two committees: an Audit Committee and a Corporate Governance Committee.  Both committees are made up of all three Directors who work closely on all Board matters.

The Audit Committee, chaired by Mr. Nguyen Quoc Khanh, is responsible for appointing the Auditors, subject to Shareholder approval, and for reviewing the results of all audits. It is also responsible for establishing internal business controls and audit procedures.  The internal compliance audit function has been delegated to an external audit firm, which submits periodic internal audit reports to the Chairman of the Audit Committee.

The Corporate Governance Committee, chaired by Professor Rolf Dubs, is responsible for the governance of the Company and the Company's relationships with multiple constituents, including the Investment Manager and its affiliates. 

The Board met quarterly and held one telephonic board meeting during the Year. In the same period, the Board oversaw the successful exercise of 12.7 million warrants issued by the Company, resulting in an equal number of additional ordinary shares being issued and raising capital totalling USD 15.2 million.

Concurrently with each meeting, the Board extensively reviewed with the Investment Manager the status and the performance of the portfolio, including investment themes, pipelines, divestures, industry trends and peer group performance comparisons.  Following the recommendations made under the portfolio management policy of the Investment Manager, during every quarterly review the Board approved and ratified as necessary the asset allocation limits and target position of each equity investment.  The Board approved and monitored the portfolio rebalancing activities where the Investment Manager exited nine portfolio companies and initiated ten new investments, raising the net number of equity holdings in the portfolio from twenty-five to twenty-six during the Year.

The share buy-back program and share price discount control procedures were also reviewed quarterly during the Board meetings.   As had been the case in the past several years, the Company held investor presentations during the twelve-month period, twice each in Zurich, Geneva and London, where the Directors met and engaged with Shareholders.   The Board also reviewed other investor relation activities, including a roadshow in Frankfurt, coverage by brokerage research and investment analysts, and investor communications.

The Board regularly reviewed the ongoing expenditures of the Company, the variance between actual expenses incurred as compared to the respective budgeted items, as well as the service qualities, costs and engagement terms of its service providers.  After careful consideration, the Board appointed Altium Capital Limited as the Company's Nominated Advisor and Winterflood Investment Trusts as the Company's broker, replacing Oriel Securities Limited in both roles, effective in June 2014.

The Audit Committee held four meetings in the Year in conjunction with the Board meetings.  The Chairman of the Investment Manager's Risk Management Committee reviewed with the Committee the Master Risk Matrix in each of the quarterly meetings.  In addition, compliance reporting was reviewed, and risk control issues were evaluated by the Committee. 

The Corporate Governance Committee also held four meetings in conjunction with the quarterly Board meetings. The Investment Manager presented its strategic plans, financial positions and organizational development in each of the Committee meetings. Throughout the year, the Committee evaluated the quality of communications between the Chairperson of the Board and its members, the timeliness and completeness of the Board meeting material submission, and the overall effectiveness of each Board meeting. 

The Committee conducted the annual performance review of the Investment Manager and approved the Key Performance Indicators as jointly recommended by the CEO and the Board of the Investment Manager.   In addition, the Committee oversaw the annual certification of the Code of Ethics by all employees, officers, advisors and Board members of the Investment Manager and the Company.  

Remuneration

The remuneration of each of the Company's Directors contains two parts:

1.   Base Fee

2.   Committee and Board related service, including attendance at Committee and Board meetings, based on the number of days worked.

In 2014, the Company's Directors' Base Fees were:

Mrs. Min-Hwa Hu Kupfer	USD 28,000
Professor Rolf Dubs	USD 20,000
Mr. Nguyen Quoc Khanh	USD 20,000

For attendance in person at each quarterly Committee and Board meeting, each Director was paid USD 1,500 per meeting day.  For attending any Committee or Board meeting held telephonically, each Director was paid USD 750 per meeting. Each Director was also compensated USD 1,500 per day on which services related to Committee and Board initiatives were rendered.

The total remuneration of the Company's Directors during the Year as the result of meeting attendance and Committee works was USD 170,750 as follows:

Mrs. Min-Hwa Hu Kupfer, Chairperson	USD 81,250
Professor Rolf Dubs, Director & Chairman, Corp. Governance Committee	USD 46,250
Mr. Nguyen Quoc Khanh, Director & Chairman, Audit Committee	USD 43,250

Directors' Ownership of VNH

Mrs. Min-Hwa Hu Kupfer	36,667 shares
Professor Rolf Dubs	30,000 shares
Mr. Nguyen Quoc Khanh	10,000 shares

During the year, the Directors increased their collective ownership of the Company from 60,000 shares to 76,667 shares as a result of the exercise of 6,667 warrants by Mrs. Min-Hwa Hu Kupfer, and of 10,000 warrants by Professor Dubs in September 2013.

 Statement of financial position as at 30 June 2014

	Note	2014	2013
		USD	USD
Assets
Cash and cash equivalents		2,459,814	2,671,910
Investments in securities at fair value	3	118,526,227	83,939,007
Accrued dividends		625,811	374,108
Receivables on sale of investments		693,059	1,326,054
Total assets		122,304,911	88,311,079
Equity
Share capital	5	120,094,331	109,507,940
Retained earnings		392,362	(22,239,418)
Total equity		120,486,693	87,268,522
Liabilities
Payables on purchase of investments		605,360	705,228
Accrued expenses		1,212,858	337,329
Total liabilities		1,818,218	1,042,557
Total equity and liabilities		122,304,911	88,311,079
Total equity represented by:
Net assets attributable to shareholders (last traded prices)		120,486,693	88,198,156
Adjustment from last traded prices to bid - market prices		-	(929,634)
Net assets attributable to shareholders (bid - market prices)	6	120,486,693	87,268,522

The net asset value per share based on last traded prices was USD1.921 as at 30 June 2014 (2013: USD1.648) calculated as per the prospectus, and the net asset value per share calculated as per IFRS, USD1.921 as at 30 June 2014 (2013: USD1.630). This is based on 62,722,025 shares outstanding (2013: 53,530,411).

Statement of comprehensive income for the year ended 30 June 2014

	Note	2014	2013
		USD	USD
Dividend income from equity securities at fair value through profit or loss		4,087,013	4,043,206
Net gain from equity securities at fair value through profit or loss	7	23,123,195	17,445,739
Net foreign exchange loss		(16,647)	(31,491)
Net investment income		27,193,561	21,457,454
Investment management fees	8	2,142,403	1,465,670
Incentive fees	8	954,449	-
Advisory fees		149,834	163,327
Administration and accounting fees	10	95,281	83,250
Custodian fees	9	141,827	76,159
Directors' fees and expenses	8	296,238	214,511
Brokerage fees		56,571	62,000
Audit fees		42,334	43,667
Publicity and investor relations fees		267,344	278,082
Insurance costs		45,000	50,000
Administrative expenses		229,240	177,145
Risk management expenses		100,000	60,000
Technical assistance for investee companies		41,260	35,000
Total operating expenses		4,561,781	2,708,811
Change in net assets attributable to shareholders		22,631,780	18,748,643
Earnings per share - basic and diluted	14	0.37	0.35

Statement of changes in equity for the year ended 30 June 2014

		Share capital	Reserve for own shares	Retained earnings	Total
		USD	USD	USD	USD
Balance at 1 July 2012		110,660,392	(176,302)	(40,988,061)	69,496,029
Total comprehensive income for the year
Change in net assets attributable to shareholders		-	-	18,748,643	18,748,643
Total comprehensive income		-	-	18,748,643	18,748,643
Contributions and distributions
Issuance of ordinary shares		304,598	-	-	304,598
Repurchase of own shares (note 5)		-	(1,259,873)	-	(1,259,873)
Warrants issuance cost		(20,875)	-	-	(20,875)
Total contributions and distributions		283,723	(1,259,873)	-	(976,150)
Balance at 30 June 2013		110,944,115	(1,436,175)	(22,239,418)	87,268,522
Balance at 1 July 2013		110,944,115	(1,436,175)	(22,239,418)	87,268,522
Total comprehensive income for the year
Change in net assets attributable to shareholders		-	-	22,631,780	22,631,780
Total comprehensive income		-	-	22,631,780	22,631,780
Contributions and distributions
Issuance of ordinary shares		15,189,736	-	-	15,189,736
Repurchase of own shares (note 5)		-	(4,597,450)	-	(4,597,450)
Warrants issuance cost		(5,895)	-	-	(5,895)
Total contributions and distributions		15,183,841	(4,597,450)	-	10,586,391
Balance at 30 June 2014		126,127,956	(6,033,625)	392,362	120,486,693

Statement of cash flows for the year ended 30 June 2014

	Note	2014	2013
		USD	USD
Cash flows from operating activities
Change in net assets attributable to shareholders		22,631,780	18,748,643
Adjustments to reconcile change in net assets attributable to shareholders to net cash from operating activities:
Dividend income		(4,087,013)	(4,043,206)
Net gain from equity securities at fair value through profit or loss		(23,123,195)	(17,445,739)
Purchase of investments		(38,903,628)	(15,961,424)
Proceeds from sale of investments		27,339,735	15,491,926
Net foreign exchange loss		16,647	31,491
Decrease in receivables on sale of investments		632,995	73,695
Increase/(Decrease) in accrued expenses		875,529	(98,483)
Dividends received		3,835,310	3,812,516
Net cash from operating activities		(10,781,840)	609,419
Cash flows from financing activities
Issuance of ordinary shares		15,189,736	304,598
Repurchase of own shares	5	(4,597,450)	(1,259,873)
Warrants issuance cost		(5,895)	(20,875)
Net cash from/(used in) financing activities		10,586,391	(976,150)
Net decrease in cash and cash equivalents		(195,449)	(366,731)
Cash and cash equivalents at beginning of the year		2,671,910	3,070,132
Effect of exchange rate fluctuations on cash held		(16,647)	(31,491)
Cash and cash equivalents at end of the year		2,459,814	2,671,910

Notes to the financial statements

1       THE COMPANY

VietNam Holding Limited("VNH" or "the Company") is a closed-end investment holding company incorporated on 20 April 2006 as an exempt company under the Companies Law in the Cayman Islands and commenced its operations on 15 June 2006, to invest principally in securities of former State-owned Entities ("SOEs") in Vietnam, prior to, at or after the time such securities become listed on the Vietnam stock exchange, including the initial privatisation of the SOEs. The Company may also invest in the securities of private companies in Vietnam, whether Vietnamese or foreign owned, and the securities of foreign companies if a significant portion of their assets are held or operations are in Vietnam.

The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential at an attractive valuation.

During the Annual General Meeting in September 2013 shareholders voted in favour of the continuance resolution, authorizing Vietnam Holding to operate in its current form through the 2016 General Meeting when a similar resolution will be put forward for shareholders approval.

VietNam Holding Asset Management Limited ("VNHAM") has been appointed as the Company's Investment Manager and is responsible for the day-to-day management of the Company's investment portfolio in accordance with the Company's investment policies, objectives and restrictions.

Standard Chartered Bank, Singapore Branchand Standard Chartered Bank (Vietnam) Limited are the custodian and the sub-custodian respectively. Standard Chartered Bank, Singapore Branch is also the administrator.

The registered office of the Company is CARD Corporate Services Ltd., Fourth Floor, Zephyr House, 122 Mary Street, PO Box 709 GT, Grand Cayman, KY1-1107, Cayman Islands.

 

2       PRINCIPAL ACCOUNTING POLICIES

(a)   Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

(b)   Basis of preparation

The financial statements are presented in United States dollars ("USD"), which is the Company's functional currency. They are prepared on a fair value basis for financial assets and financial liabilities at fair value through profit or loss. Other assets and liabilities are stated at amortised cost.

The Company's shares were issued in USD and the listings of the shares on the AIM market of the London Stock Exchange and the Entry Standard of the Frankfurt Stock Exchange are in USD and Euro, respectively. The performance of the Company is measured and reported to the investors in USD, although the primary activity of the Company is to invest in the Vietnamese market. The Board considers the USD as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in USD, which is the Company's functional currency.

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The estimated and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other components. The Company is engaged in a single segment of business, being investment in Vietnam. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value ("NAV") calculated as per the prospectus. Therefore a reconciliation between the measure of NAV used by the Board and that contained in these financial statements has been provided in a footnote to the statement of financial position.

(c)   Changes in accounting policies

Except for the changes below, the Company has consistently applied the accounting policies as set out in Note 2 (d) to (l) to all periods presented in these financial statements.

The Company has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 July 2013.

(a)    IFRS 13 Fair Value Measurement;

In accordance with the transitional provisions of IFRS 13, the Company has applied the new definition of fair value, as set out in Note 2(e)(iv), prospectively.

As a result, the Company has changed the valuation approach for financial assets and financial liabilities measured at fair value for which a quoted price in an active market is available. Management concluded that last traded prices for such instruments are representative of fair value and generally to use last traded prices for such instruments. In 2013, such financial assets were measured at bid price and such financial liabilities at asking price. The change in accounting policy did not have a significant impact on the measurement of the Company's assets and liabilities.

The Company has included new disclosures in the financial statements, which are required under IFRS 13. These new disclosure requirements are not included in the comparative information.

However, to the extent that disclosures were required by other standards before the effective date of IFRS 13, the Company has provided the relevant comparative disclosures under those standards.

(d)   Foreign currency translation

Transactions in foreign currencies other than the functional currency are translated at the rate ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated to USD at the rates ruling on the year-end date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are included in the statement of comprehensive income. Foreign currency exchange differences relating to financial instruments at fair value through profit or loss are included in the realised and unrealised gains and losses on those investments. All other foreign currency exchange differences relating to other monetary items, including cash and cash equivalents, are included in net foreign exchange gains and losses in the statement of comprehensive income.

(e)   Financial instruments

(i) Classification

The Company designates all its investments as financial assets at fair value through profit or loss category. Financial instruments are designated at fair value through profit or loss upon initial recognition. These include financial assets that are not held for trading purposes and which may be sold. These are investments in exchange-traded equity instruments and unlisted equity instruments.

Financial assets that are classified as loans and receivables include accrued dividends.

Cash and cash equivalents are measured at amortised cost.

Financial liabilities that are not at fair value through profit or loss include accrued expenses.

 

(ii) Recognition

Financial assets and liabilities at fair value through profit or loss are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are recognised on the date they are originated.

Financial assets and financial liabilities at fair value through profit or loss are recognised initially at fair value, with transaction costs recognised in profit or loss. Financial assets or financial liabilities not at fair value through profit or loss are recognised initially at fair value plus transaction costs that are directly attributable to their acquisition or issue.

(iii) Derecognition

A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or are surrendered.

Financial assets that are sold are derecognised, and the corresponding receivables from the buyer for the payment are recognised on the trade date, being the date the Company commits to sell the assets.

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.

(iv) Measurement

Policy applicable from 1 July 2013

'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company measures instruments quoted in an active market at a bid price.

If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.

As at 30 June 2014, 1.2% (2013: 9.0%) of the valuations of the net assets of the Company were based on quotes obtained from brokers.

Any increases or decreases in values are recognised in the statement of comprehensive income as an unrealised gain or loss.

Policy applicable before 1 July 2013

'Fair value' is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date.

When available, then the Company measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as 'active' if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.

If a market for a financial instrument is not active, then the Company establishes fair value using a valuation technique. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if they are available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.

Assets and long positions are measured at a bid price; liabilities and securities sold short are measured at an asking price.

(v) Gains and losses on subsequent measurement

Gains and losses arising from a change in the fair value of financial instruments are recognised in the statement of comprehensive income.

(vi) Impairment

Financial assets that are stated at cost or amortised cost are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the statement of comprehensive income as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate.

If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the impairment is reversed through the statement of comprehensive income.

(vii) Cash and cash equivalents

Cash comprises current deposits with banks and fixed deposits. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

(f)    Offsetting

Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when the Company has a legally enforceable right to set off the recognised amounts and the transactions are intended to be settled on a net basis or simultaneously, e.g. through a market clearing mechanism.

(g)   Amounts due to/from brokers

Amounts due to/from brokers represent security purchases and sales transactions which are contracted for but not yet delivered at the end of the accounting period.

(h)   Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effect.

 

Repurchase, disposal and reissue of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own share account. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in non-distributable capital reserve.

(i)    Taxation

Tax expense comprises current and deferred tax.  Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.  Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised.  Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due.  The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.  This assessment relies on estimates and assumptions and may involve a series of judgements about future events.  New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

At present, no income, profit, capital, or capital gain taxes are levied in the Cayman Islands, and accordingly, no provision for such taxes has been recorded by the Company in the accompanying financial statements. In the event that such taxes are levied, the Company has received an undertaking from the Governor in Cabinet of the Cayman Islands exempting it from all such taxes for a period of twenty years from 2 May 2006.

The Company is liable to Vietnamese tax of 0.1% (2013: 0.1%) on the sales proceeds of the onshore sale of equity investments. This is included in net gain/(loss) from equity securities at fair value through profit or loss.

(j)    Interest income and expense

Interest income and expense is recognised in the statement of comprehensive income using the effective rate method.

Interest income includes the amortisation of any discount or premium on zero coupon bonds, which is taken as income on the basis of yield to redemption, from the date of purchase.

 

(k)   Dividend income

Dividend income is recognised in profit or loss on the date on which the right to receive payment is established. For quoted equity securities, this is usually the ex-dividend date. For unquoted equity securities, this is usually the date on which the shareholders approve the payment of a dividend. Dividend income from equity securities designated as at fair value through profit or loss is recognised in profit or loss in a separate line item.

(l)    Fee and commission expense

Fees and commission expenses are recognised in profit or loss as the related services are performed.

3       FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Financial assets of the Company include investments in securities, cash and cash equivalents and accrued income. Financial liabilities comprise payables on purchase of investments and accrued expenses. Accounting policies for financial assets and liabilities are set out in note 2.

The Company's investment activities expose it to various types of risk that are associated with the financial instruments and the markets in which it invests. The most important types of financial risk to which the Company is exposed are market risk, currency risk, interest rate risk, credit risk and liquidity risk.

Asset allocation is determined by the Company's Investment Manager who manages the distribution of the assets to achieve the investment objectives. Divergence from target asset allocations and the composition of the portfolio is monitored by the Investment Manager.

Market risk

Market risk is the risk that the value of a financial asset will fluctuate as a result of changes in market prices, whether or not those changes are caused by factors specific to the individual asset or factors affecting all assets in the market. The Company is predominately exposed to market risk within its securities purchased in the Vietnamese market.

The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the Board. 

The Company's investments in securities are exposed to market risk and are disclosed by the following generic investment types:

	2014		2013
	Fair value in USD	% of net assets	Fair value in USD	% of net assets
Shares and similar investments - listed	117,131,478	97.22	76,026,001	87.12
Shares and similar investments - unlisted	1,394,749	1.16	7,913,006	9.07
	118,526,227	98.38	83,939,007	96.19

At 30 June 2014, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit or loss of USD5,926,311  (2013: USD4,196,950 ). A 5% increase in market value would have led to an equal and opposite effect on NAV and profit or loss.

Currency risk

The Company may invest in financial instruments and enter into transactions denominated in currencies other than its functional currency. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to other currencies may change and have an adverse effect on the value of the Company's assets or liabilities denominated in currencies other than USD.

The Company's net assets are calculated every month based on the most up to date exchange rates while the general economic and foreign currency environment is continuously monitored by the Investment Manager and reviewed by the Board at least once each quarter.

The Company may enter into arrangements to hedge currency risks if such arrangements become desirable and practicable in the future in the interest of efficient portfolio management.

As at 30 June 2014 the Company had the following foreign currency exposures:

		Fair value
		2014	2013
		USD	USD
Vietnamese Dong		120,036,280	85,981,766
Pound Sterling		11,144	176,749
Swiss Franc		13,350	40,784
Euro		997	947
		120,061,771	86,200,226

At 30 June 2014, a 5% reduction in the value of the Vietnamese Dong, Pound Sterling,Swiss Franc,Euro versus the US Dollarwould have led to a reduction in NAV and profit or loss of USD6,001,814  (2013: USD4,299,085), USD557  (2013: USD8,837), USD668  (2013: USD2,039) and USD50  (2013: USD47) respectively. A 5% increase in value would have led to an equal and opposite effect.

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The majority of the Company's financial assets are non-interest-bearing. Interest-bearing financial assets and interest-bearing financial liabilities mature or reprice in the short-term, no longer than twelve months. As a result, the Company is subject to limited exposure to interest rate risk due to fluctuations in the prevailing levels of market interest rates.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.

At 30 June 2014, the following financial assets were exposed to credit risk (including settlement risk): cash and cash equivalents, accrued dividend, receivable from sale of investments and other receivables. The total amount of financial assets exposed to credit risk amounted to USD3,778,684 (2013: USD4,372,073).

Substantially all of the assets of the Company are held by the Company's custodian, Standard Chartered Bank, Singapore Branch. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to cash and securities held by the custodian to be delayed or limited. The Company monitors its risk by monitoring the credit quality and financial positions of the custodian the Company uses.

Liquidity risk

The Company, a closed-end investment company, invests in companies through listings on the Vietnam stock exchanges or on other stock exchanges. There is no guarantee however that the Vietnam stock exchanges will provide liquidity for the Company's investments. The Company also invests in equity securities which are not listed on stock exchanges. The Company may have to resell such investments in privately negotiated transactions.

The Company's overall liquidity risks are monitored on at least a quarterly basis by the Board. The Company is a closed-end investment company so shareholders cannot redeem their shares directly from the Company.

4       OPERATING SEGMENTS

Information on gains and losses derived from investments are disclosed in the statement of comprehensive income.

The Company is domiciled in the Cayman Islands. Entity wide disclosures are provided as the Company is engaged in a single segment of business, investing in Vietnam. In presenting information on the basis of geographical segments, segment investments and the corresponding segment net investment income arising thereon are determined based on the country of domicile of the respective investment entities.

All of the Company's investments in securities at fair value are in Vietnam as at 30 June 2014and 30 June 2013. All of the Company's investment income can be attributed to Vietnam for the years ended 30 June 2014and 30 June 2013.

5       SHARE CAPITAL

Ordinary shares of USD1 each

The ordinary shares have been created pursuant to the Companies Law in the Cayman Islands. The Company was incorporated with an authorised share capital of USD100,000,000 divided into 100,000,000 ordinary shares of USD1 each. According to the Companies Law and articles of association, the Company may from time to time redeem all or any portion of the shares held by the shareholders upon giving notice of not less than 30 calendar days to the shareholders.

On 6 June 2006, the Board resolved that 56,250,000 ordinary shares would be allotted at a placing price of USD2 per ordinary share. The ISIN number of the ordinary shares is KYG9361X043.

On 23 September 2010, during its annual general meeting, the shareholders approved a Share Repurchase Programme. The approval were renewed on its annual general meetings on 2011, 2012 and 2013.

	2014	2013
	No. of shares	No. of shares
Total shares issued and fully paid (after repurchases and cancellations) at beginning of the period	54,836,792	54,582,112
Shares issued upon exercise of warrants during the period	12,700,448	254,680
	67,537,240	54,836,792
Repurchased and reserved for own shares
At beginning of the period	(1,306,381)	(165,000)
During the period	(3,508,834)	(1,141,381)
	(4,815,215)	(1,306,381)
Total outstanding ordinary shares with voting rights	62,722,025	53,530,411

As a result, as at 30 June 2014 the Company has 62,722,025(2013: 53,530,411) ordinary shares with voting rights in issue (excluding the reserve for own shares), and 4,815,215 (2013: 1,306,381) are held as reserve for own shares.

The Company strives to invest the capital raised to meet the Company's investment objectives which are to achieve long term capital appreciation through a diversified portfolio of companies that have high potential in Vietnam. The Company achieves this aim by investing principally in securities of former State-owned Entities ("SOEs") in Vietnam prior to, at or after such securities becoming listed on the Vietnam stock exchange.

The Company does not have any externally imposed capital requirements.

Incremental costs directly attributable to the issue or redemption of ordinary shares are recognised directly in equity as a deduction from the proceeds or part of the acquisition cost.

The Company's general intention is to reinvest the capital received on the sale of investments. However, the Board may from time to time and at its discretion, either use the proceeds of sales of investments to meet the Company's expenses or distribute them to shareholders. Alternatively, the Board of Directors may redeem ordinary shares with such proceeds for shareholders pro rata to their shareholding upon giving notice of not less than 30 calendar days to shareholders (subject always to applicable law) or repurchase ordinary shares at a price not exceeding the last published net asset value per share.

 

Warrants

On 21 May 2012, the Company issued a Prospectus for a bonus issue of warrants to shareholders pro rata, on the basis of one warrant for every three ordinary shares held. The exercise date of these warrants was initially on 13 December 2012 with an exercise price of USD1.196 per share.A total of 18,194,037 warrants were issued and were listed on AIM. Both Shareholders and Warrantholders gave their approval to a proposal of extension of the term of the warrants through the addition of two exercise dates, 25 April 2013 and 25 September 2013.

At the reporting date, all warrants were either exercised or expired and no warrants were outstanding (2013: 18,194,037).

On 25 September 2013 and 9 October 2013, 12,700,448 (2013: 221,750) shares were issued following the exercise of subscription rights by holders of the warrants and the remaining 5,238,909 unexercised warrants were lapsed.

6       NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

Reconciliation of net assets

The Company adopted IFRS 13 with effect from 1 July 2013. Under IFRS 13, the Company uses last traded market pricing to determine the fair values of financial assets and financial liabilities quoted in an active market.

For the year ended 30 June 2013, under IAS 39, the Company valued financial assets quoted in an active market at bid prices and financial liabilities quoted in an active market at ask prices. This created a presentation issue because, in accordance with the Company's prospectus, the redemption amounts of the ordinary shares are calculated using the net assets of the Company computed at the last traded prices of the underlying financial instruments.

The table below shows a reconciliation for 2013 of the net assets and net asset value per share between the amounts computed as per the Company's prospectus and the amounts computed in accordance with IFRS. No such reconciliation is required following the adoption of IFRS 13 because last traded prices are used to value financial assets and financial liabilities quoted in an active market and so no reconciliation amount arises.

		2014	2013
		USD	USD
Net assets as per prospectus		120,486,693	88,198,156
Adjustment from last traded prices to bid-market prices		-	(929,634)
Net assets in accordance with IFRS		120,486,693	87,268,522

7       NET GAIN FROM EQUITY SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

		2014	2013
		USD	USD
Net gain from equity securities at fair value through profit or loss:
Realised gain/(loss)		38,415	(7,217,354)
Adjustment to fair value of equity securities at fair value through profit or loss		23,084,780	24,663,093
		23,123,195	17,445,739

8       RELATED PARTY TRANSACTIONS

Investment management fees

During the period the Company's Shareholders approved an amendment to the Investment Management Agreement as detailed in the Company's circular dated 16 August 2013. Pursuant to the amended agreement the Investment Manager is entitled to receive a monthly management fee, paid in the manner set out as below:

-    On the amount of the Net Asset Value of the Company up to and including USD100 million, one-twelfth of two per cent.;

-    On the amount of the Net Asset Value of the Company above USD100 million up to and including USD150 million, one-twelfth of 1.75 per cent.; and

-    On the amount of the Net Asset Value of the Company that exceeds USD150 million, one-twelfth of 1.50 per cent.

The total fees accruing to the Investment Manager for the year to 30 June 2014 were USD2,142,403 (2013: USD1,465,670) as a management fee.

Incentive fees

The Company will pay the Investment Manager an incentive fee equal to 15 per cent of the Excess Performance Amount each year, subject to certain criteria being met.  Excess Performance Amount is calculated as follows:

Excess Performance Amount = (Adjusted NAV per share - Initial High Water Mark) x Weighted Average number of shares.

The initial high water mark is calculated as the NAV as at 30 September 2013 increased by 8%. After the initial accounting period (i.e. 30 June 2014), the initial high water mark will be increased by 5% per annum on a compound basis.

The fee is calculated and payable as set out in the Investment Management Agreement Side Letter dated 11 September 2013.

However, the maximum incentive fee that can be earned by and paid to the investment manager in respect of any accounting period shall be equal to three per cent of the NAV of the Company at the end of the relevant accounting period.

		2014	2013
		USD	USD
Incentive fee		954,449	-

Directors' fees and expenses

The Board determines the fees payable to each Director, subject to a maximum aggregate amount of USD350,000 per annum being paid to the Boardas a whole. The Company also pays reasonable expenses incurred by the Directors in the conduct of the Company's business including travel and other expenses. The Company pays for directors and officers liability insurance coverage.

The charges for the year for the Directors fees were USD170,750 (2013: USD159,500) and expenses were USD125,488 (2013: USD55,011).

Directors' ownership of sharesand warrants

As at 30 June 2014, three Directors, Min-Hwa Hu Kupfer, Nguyen Quoc Khanhand Rolf Dubs held 36,667 (2013: 30,000), 10,000 (2013: 10,000) and 30,000 (2013: 20,000) ordinary shares of the Company respectively, representing 0.06% (2013: 0.06%), 0.02% (2013: 0.02%) and 0.05% (2013: 0.04%) of the total shares outstanding.

During the year, Min-Hwa Hu Kupfer and Rolf Dubs exercised 6,667 (2013: nil) and 10,000 (2013: nil) warrants to subscribe ordinary shares, amounting to 16,667 (2013: nil) and 0.13% of the total warrants issued (2013: nil) respectively. No warrants were outstanding as at 30 June 2014.

 

9       CUSTODIAN FEES

Custodian fees are charged at a minimum of USD12,000 per annum and received as a fee of 0.08% on the assets under administration ("AUA") per annum. Custodian fees comprise safekeeping fees, transaction fees, money transfer fees and other fees. Safekeeping of unlisted securities up to 20 securities is charged at USD12,000 per annum. Transaction fees, money transfers fees and other fees are charged on a transaction basis.

The charges for the year for the Custodian fees were USD141,827 (2013: USD76,159).

 

 

10     ADMINISTRATIVE AND ACCOUNTING FEES

The administrator receives a fee of 0.07% per annum for assets under administration ("AUA") less than USD100,000,000; or 0.06% per annum for AUA greater than USD100,000,000 calculated on the basis of the net assets of the Company, subject to an annual minimum amount of USD5,500 per month.

The charges for the year for the Administration and Accounting fees were USD95,281 (2013: USD83,250).

11     CONTROLLING PARTY

The Directors are not aware of any ultimate controlling party as at 30 June 2014 or 30 June 2013.

12     FAIR VALUE INFORMATION

For certain of the Company's financial instruments not carried at fair value, such as cash and cash equivalents, accrued dividends, other receivables, receivables/payable upon sales/purchase of investments and accrued expenses, the amounts approximate fair value due to the immediate or short term nature of these financial instruments.

Other financial instruments are measured at fair value on the statement of comprehensive income.

Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

·        Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges (for example, London Stock Exchange, Frankfurt Stock Exchange, New York Stock Exchange) and exchange traded derivatives like futures (for example, Nasdaq, S&P 500).

·        Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This level includes the majority of the OTC derivative contracts, traded loans and issued structured debt. The sources of input parameters like LIBOR yield curve or counterparty credit risk are Bloomberg and Reuters.

·      Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible.

The table below analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. All fair value measurements below are recurring.

	Level 1	Level 2	Level 3	Total
	USD	USD	USD	USD
2014
Financial assets designated at fair value upon initial recognition
Equity investments	117,131,478	-	1,394,749	118,526,227
2013
Financial assets designated at fair value upon initial recognition
Equity investments	76,026,001	-	7,913,006	83,939,007

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing whether an input is significant requires judgement including consideration of factors specific to the asset or liability. Moreover, if a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that fair value measurement is a Level 3 measurement.

Although the Company believes that its estimates of fair value are appropriate, the use of different assumptions could lead to different measurements of fair value. For fair value measurements in Level 3, if the reasonable possible alternative assumptions were increased/decreased by 10%, the impact on profit/(loss) would be USD139,475 (2013: USD791,301).

 

Level 3 reconciliation

		Financial assets designated at fair value through profit or loss
		2014	2013
		USD	USD
Balance at 1 July		7,913,006	8,695,443
Sales		(10,192,834)	-
Purchases		1,417,353	-
Total gains and losses recognised in profit or loss *		2,257,224	(782,437)
Balance at 30 June		1,394,749	7,913,006

*   Total gains or losses recognised in profit or loss for assets and liabilities held at the end of the reporting period, as included in the statement of comprehensive income.

 

13     CLASSFICATIONS AND FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

The table below provides a breakdown of the line items in the Company's statement of financial position to the categories of financial instruments.

	Note	Designated as at fair value through profit or loss	Loans and receivables	Other liabilities	Total carrying amount
		USD	USD	USD	USD
2014
Cash and cash equivalents		-	2,459,814	-	2,459,814
Investments in securities at fair value	3	118,526,227	-	-	118,526,227
Accrued dividends		-	625,811	-	625,811
Receivables from sale of investments		-	693,059	-	693,059
		118,526,227	3,778,684	-	122,304,911
Payables on purchase of investments		-	-	605,360	605,360
Accrued expenses		-	-	1,212,858	1,212,858
		-	-	1,818,218	1,818,218

2013
Cash and cash equivalents				-	2,671,910	-	2,671,910
Investments in securities at fair value		3		83,939,007	-	-	83,939,007
Accrued dividends				-	374,108	-	374,108
Receivables from sale of investments			-		1,326,054	-	1,326,054
				83,939,007	4,372,072	-	88,311,079
Payables on purchase of investments			-		-	705,228	705,228
Accrued expenses				-	-	337,329	337,329
				-	-	1,042,557	1,042,557

14     EARNINGS PER SHARE

The calculation of earnings per share at 30 June 2014was based on the change in net assets attributable to ordinary shareholders of USD22,631,780 (2013: USD18,748,643) and the weighted average number of shares outstanding of 60,599,915 (2013: 53,894,886).

 

15     NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2013, and have not been applied in preparing these financial statements. Those that may be relevant to the Company are set out below. The Company does not plan to adopt these standards early.

(a)    Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

The amendments to IAS 32 clarify the offsetting criteria in IAS 32 by explaining when an entity currently has a legally enforceable right to set-off and when gross settlement is considered to be equivalent to net settlement. The amendments are effective for annual periods beginning on or after 1 July 2014 and interim periods within those annual periods. Early application is permitted. The standard is not expected to have a material impact on the Company's financial statements.

 

END

 

 

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